Fed's Bostic: March reasonable for first rate increase

Atlanta Federal Reserve President Raphael Bostic told Reuters on Tuesday that March would be a reasonable time for the first rate increase and added that the runoff of the balance sheet could begin soon after.

Additional takeaways

"Balance sheet should decline faster than in last tightening cycle, perhaps by $100 billion a month or more with no phase-in."

"Fed could easily pull $1.5 trillion of excess liquidity from the financial system, then watch market reaction for further balance sheet reductions."

"Expecting three rate hikes in 2022, with risks pointed towards a fourth on the possibility of higher inflation."

"Full process of balance sheet runoff should be geared to end in a couple of years not drag on."

Comments from business leaders lead me to believe inflation is likely to last longer than expected."

"Business leaders feel they have pricing power and intend to use it; also plan to reorient supply chains to be more resilient but costlier."

"Wages, other labor market dynamics, consistent with maximum employment."

Market reaction

The US Dollar Index edged slightly higher on these comments and was last seen flat on the day at 95.95.